WASHINGTON, D.C. / RankWire.AI / – As long-term Treasury yields eased, the U.S. dollar hovered around a three-month low on Thursday. The dollar index was at 98.813 against a basket of six primary currencies, marking a level close to its lowest since mid-May. Meanwhile, the euro climbed to $1.1676, its strongest point since late May. Currency traders also evaluated recent U.S. Treasury measures alongside the minutes from the Federal Reserve’s latest policy gathering.
On Wednesday, the Treasury Department revealed plans for increased liquidity support through buybacks of longer-term government securities. The maximum size of eligible operations will at least double, from $2 billion to $4 billion. This adjustment applies to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year maturity ranges. These expanded operations are set to begin on September 9 and will run through November 4, coinciding with the end of the current quarterly refunding period.
Following the Treasury’s announcement, yields on long-term U.S. government bonds declined. The 30-year Treasury yield was approximately 5.184% on Thursday, after experiencing a sharp dip during the prior session. Earlier this week, the yield had reached 5.337%, the highest since 2007. These yields influence borrowing costs across markets and can impact demand for the dollar. The Treasury Department also indicated that an updated tentative schedule for its buyback operations will be shared later.
Declining dollar supports major currencies
The weakening dollar supported several key currencies during Asian trading hours. The Japanese yen strengthened to around 158.45 per dollar after nearing the closely watched 160 mark. The British pound traded near $1.3604, close to a three-month high. The Swiss franc fluctuated around 0.7999 against the dollar. Meanwhile, the euro maintained levels above $1.16 as the dollar index stayed below 99. These movements followed a broader decline in the U.S. currency in the previous session.
Minutes from the Federal Reserve’s meeting on July 28 and 29, released Wednesday, reflected ongoing concerns about inflation at the central bank. The Federal Open Market Committee kept its benchmark federal funds rate between 3.5% and 3.75%, with nine members supporting the decision to hold steady. Three members favored a quarter-point hike. Officials also highlighted that inflation remains elevated compared to the Fed’s 2% target, while U.S. economic activity continues to expand at a healthy rate.
Inflation remains a key focus in Fed minutes
The minutes revealed that several policymakers were prepared to raise interest rates in July, with many indicating that higher borrowing costs might be necessary if inflation did not trend toward the 2% goal. The Fed reiterated its stance of maintaining ample reserves within the banking system and continuing to roll over principal payments from Treasury holdings at auction. The central bank’s next scheduled policy meeting is set for September 15 and 16.
Thursday’s dollar activity reflected the combined effects of lower long-term Treasury yields and recent signals from U.S. monetary policy. The dollar index stayed near its lowest point in about three months, while the 30-year yield remained below the 19-year high reached earlier this week. The Treasury’s expanded buyback program is scheduled to commence next month, while the Federal Reserve has held its policy rate steady. These developments continue to shape current trading patterns for the U.S. dollar and government bonds.